Saturday, June 01, 2013

A bipartisan Senate bill would modernize the Administrative
Procedure Act by strengthening cost-benefit analysis across all federal
regulatory agencies, improving transparency in the rulemaking process, and
providing a more rigorous examination of facts underlying the most expensive
rules. The Regulatory Accountability Act, S. 1029, was introduced by Sens. Rob
Portman (R-Ohio) and Mark Pryor (D-Ark). Senators Susan Collins (R-Me), Bill
Nelson (D-Fla), Joe Manchin (D-WVa), Angus King (I-Me), Kelly Ayotte (R-NH),
Mike Johanns (R-Neb), and John Cornyn (R-Tex) are original cosponsors of the
bill. A bipartisan House companion bill,HR 2122, was introduced by Rep. Bob Goodlatte (R-Va) and Rep. Collin Peterson (D-Minn),
Ranking Member on the Agriculture Committee.

The legislation would codify the duty of independent federal
agencies, such as the SEC and the CFTC, to analyze the costs and benefits of
new regulations. It would also require agencies to adopt the least costly or
most cost-effective approach to achieve their objectives. To hold agencies
accountable, the bill would permit a judicial check on an agency’s
cost-benefits analysis of major regulations. This review would be deferential,
but the courts would ensure that agencies do not rely on irrational assumptions
or treat cost-benefit analysis as a mere afterthought.

Designed to open the regulatory process to greater transparency,
the Act invites early public participation on major rules and requires agencies
to disclose the data they rely upon. It also would ensure that agencies use
sound scientific and technical data to justify new rules, in keeping with the
President’s directive that agencies should use the best available science to
craft regulations.

The legislation would also
require agencies to follow a more evidence-based approach in crafting
regulations that will cost more than $1 billion annually. These high-impact
rules are relatively rare (the White House identified seven in development last
year), but the cost of getting them wrong is steep. The legislation would give
stakeholders access to an agency hearing to test the key disputed facts
underlying these rules. It will take some additional work on the front end,
noted Sens. Portman and Pryor, but the result will be lower costs and more
stable regulatory outcomes.

This legislation heeds President Obama’s recent call for public
participation and open exchange before a rule is proposed. Prior to proposing
any major rule, regulators would be required to issue a simple notice
explaining the problem that they intend to address and inviting the public to
submit information on the need for a new rule and potential options the agencies
should consider before proposing a rule. To improve the quality of new rules,
agencies would be required to use the best available scientific, economic, and
technical information. The sponsors believe that this is consistent with the
President’s statements in Executive Order 13563.

The legislation would also
cut back on what the senators call the “misuse” of guidance documents, which
are described as agency directives written outside the normal public process of
notice and comment, while allowing their legitimate use to continue.
Specifically, it would adopt the good-guidance practices issued in a final OMB
bulletin on January 25, 2007, and ensure that agencies do not use guidance to
skirt the public input required to write new rules.

The legislation builds well-recognized best practices for
regulatory analysis, integrating cost-benefit analysis into each step of the
rulemaking process, as well as judicial review, in the case of major rules.
These principles are drawn from the long-standing, partisan executive-order
framework created by the Reagan and Clinton Administrations and reaffirmed by
President Obama in January 2011. Those principles would be made permanent,
enforceable, and applicable to independent federal agencies, which are
currently exempt.

The legislation requires the SEC, the CFTC, and other federal
agencies to adopt the least-costly regulatory alternative that would achieve
the policy goals set by Congress. It permits agencies to adopt a more-costly
approach only if the agency demonstrates that the alternative is more
cost-effective in the long term. This directive would reinforce the Executive
Order 13563’s instruction to federal agencies to minimize regulatory costs and
tailor regulations to impose the least burden on society.

For high-impact regulations, defined as those costing $1 billion or
more a year, the cost of getting underlying facts wrong is substantial and
warrants additional scrutiny, posited Sens. Portman and Pryor. The legislation
would give parties affected by billion-dollar rules access to an administrative
hearing to test the accuracy of the evidence and assumptions underlying an
agency’s proposal. The scope of the hearing would be limited to disputed
factual issues, which, if misapprehended by the agency, could impose
unnecessary burdens on the economy.

Parties affected by major rules (those involve $100 million) would
also have access to hearings, unless the agency concludes that the hearing
would not advance the process or would unreasonably delay the rulemaking.

As a consequence of the administrative hearing, high-impact rules
would bejudicially reviewed under a substantial-evidence review, which, while
still highly deferential, allows judges reviewing these rules to ensure that
agency justifications are supported byevidence that a reasonable mind could
accept as adequate to support a conclusion based on the record as a whole. This
standard would also apply to major rules that undergo the formal hearing
procedure.